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Service tax should be cut to 8 per cent
June, 24th 2009

Although a large section of the industry has expressed its wishlist for the general Budget, a review of service tax tops the demand with several quarter petitioning reduction in the rate from 10 per cent to about 8 per cent in the indirect tax to bolster sagging demand for industrial goods and services.

Arvind Pradhan, director general of the Indian Merchants Chambers (IMC) said that the trade body has pleaded for reduction of service tax from the present rate of 10 per cent to 8 per cent, in tune with the reduction in Cenvat rate, for boosting the services sector which is reeling under the impact of economic slowdown.

Service tax rate on taxable services were brought down from 12 per cent to 10 per cent by Finance Minister Pranab Mukherje in February.

Pradhan said that they have also urged upon the Pranab Mukherjee for granting appropriate exemptions either full or part to sectors likely to be affected under the current economic downturn, like hospitality, travel & tourism, real estate etc, in respect of services provided by them.

According to Vinod Juneja, managing director of Binani Industries Ltd, infrastructure development sectors like highways, roads, ports etc should be given added priority and high taxes in industries like cement and coal should be rationalised.

Since, cement is a bulk commodity with a high distribution cost, we also seek an abatement of at least 35 to 60 per cent in excise duty on cement from the government. These benefits will be passed on to the consumers and help to kick start the low-cost housing projects and give boost to more infrastructure development, he said.

Talking on gypsum and coal, Juneja said that currently, VAT was at 12.5 per cent and excise duty was at 8 per cent, plus there are taxes on import of gypsum and coal due to whcih the total tax levy comes to 21 per cent, this according to him should be reduced to 11 per cent as whole.

Several industries have also demanded a amendment to the law governing imports of services to avoid double taxation.

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